Small towns ? here comes FM radio

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By TT Bureau
  • Published 27.11.05

The N.G. George Muthoot-promoted Muthoot group, which has its roots in Kerala, will be bidding for permission to set up frequency modulation (FM) radio stations and has applied to the government for the purpose. When bidding for FM frequencies starts in January 2006, Muthoot is likely to seek stations in Cochin, Trivandrum, Kozhikode, Trichur and Kunoor in Kerala, though the group’s Delhi-based senior executive K.C. Jacob says that the company could also cock an eye at a national presence.

Such ambitions may herald a new dawn ?the coming of FM radio to small town India. Private FM radio has been limited to the metros for the last five years, because the government confined bidding for FM radio to the metros when it first invited private companies to bid in1999. That’s about to change ?FM radio is set to hit small towns like Asansol in West Bengal, Akola in Maharashtra, Itanagar in Arunachal and Raipur in Chattisgargh. The government has now embarked upon a much bigger programme to usher in FM nationwide ? nearly 336 radio frequencies (read: stations) are up for grabs in 91 cities.

So residents of small towns who have so far had to tune in to All India Radio’s amplitude modulated (AM) signals can now share in the joys of listening to FM signals ? crystal clear music and local programmes (FM reception is clearer because the area of transmission is limited to 50-60 km).

What is more, FM radio stations are poised to usher in a programming revolution. A new government policy on FM radio makes the business viable and a lot more variety in content is expected. The pressure on making money had forced all FM radio stations to play only popular music. Now expect a host of new niche channels to be launched ? helplines for women, channels that focus on the traffic and perhaps classical music channels.

The government is currently looking at the 101 applications that have been filed in the pre-qualification round. A number of national and regional print media companies have applied, including The Times of India group, the India Today group, The Hindustan Times, Mid-Day, Dainik Bhaskar, Rajasthan Patrika, Dainik Jagran, Malayalam Manorama, Eenadu, Sandesh and Sambhaav. Other well-known groups on the list include Anil Dhirubhai Ambani Enterprises, BPL (Rajeev Chandrashekhar), Music Broadcast, Zee, BAG Films and Sri Adhikari Brothers. Rajeev Chandrashekhar, the former BPL Mobile promoter who sold his controlling interest in his company to Hutchison Essar, confirms that he wants to put up several stations in west India and in south India but declines to disclose the names of the cities or the number of radio stations. “It’s too premature to talk about such details. But yes, I have an abiding interest in music. Besides, I am an investor now and I’m definitely looking at FM radio.” Small businessmen and local builders from the smaller towns too have put in bids.

Why are businessmen keen on setting up FM radio stations? Answer: The new government policy has made the business attractive. Earlier, FM radio promoters had to pay a hefty annual licence fee of Rs 1 crore to Rs 11 crore per station. The fee escalated by 15 per cent a year. The high licence fee almost crippled the 21 radio stations operating in 12 cities and private radio operators are estimated to have lost about Rs 270 crore in the last five years. But the government has introduced a new system ? radio station operators have to pay a one-time entry fee and give the government four per cent of their revenue thereafter. Exclaims Radio Mirchi’s (run by Entertainment Network India Ltd) chief executive officer A.P. Parigi: “The government must be complimented for making FM radio viable.”

Secondly, the new government policy allows foreign companies, institutional investors and non-resident Indians to buy up to 20 per cent of the equity of radio station companies. So Radio Mid-Day has hooked up with BBC Radio. Hindustan Times Media is also said to have forged a loose alliance with Richard Branson’s Virgin Radio. Several other foreign companies are looking to partner Indian companies, including Clear Channel, the $ 2.7 billion company that runs 3,800 radio stations in the US, and Capital Radio, is now a part of UK’s GCap Media.

Thirdly, FM transmission infrastructure is also cheaper. By spending between Rs 2 crore and Rs 6 crore, depending on the city, a company can set up a major media platform. “Owing to inexperience, radio operators overpaid for studio equipment earlier. Today you can build a reasonable studio for about Rs 20 lakh and a state-of-art one for about Rs one crore,” says P.S. Sundaram, managing director of Technomedia Solutions, an engineering company that helps set up radio channels.

Radio is also viewed now as a sexy business, because, as Mid-day Multimedia’s chief financial officer Manajit Ghosal says, advertising is up. In India, radio’s share of total advertising is barely 2 per cent; the world average is between 6 per cent and 7 per cent. “You see some spurt in markets like Sri Lanka, Argentina and Mexico where radio advertising enjoys an abnormal 17 to 22 per cent market share. Clearly, the gap will foster growth in India,” says Ghosal who expects radio advertising to grow by 45 to 55 per cent every year for the next six or seven years. Adds a Mumbai-based radio business expert: “Today a market leader in Delhi and Mumbai can mop up ad revenue worth Rs 25 crore in each of these cities.”

Experts expect that a large chunk of retail advertising will be diverted to radio channels in small and big towns. “The reason for that would certainly not only be the low cost of radio advertising but also the identification listeners and local advertisers have with the channel,” says radio consultant Sunil Kumar.

Little surprise, then, several companies are hoping to bid for 10 to 15 stations at least. Says BAG Film’s director (new media) Rajiv Mishra: “We are looking at a reasonable number of frequencies but in the non-metros.” Adds Mark and Adhikari, co-promoter of Sri Adhikari Brothers, who has set up a separate company to launch his radio business: “We will bid for 10-15 medium-sized cities.”

The big media companies, however, may not be content with running radio stations in small cities. They want a national footprint and are expected to bid for radio frequencies in cities like Delhi, Mumbai, Bangalore, Hyderabad, Pune and Lucknow. “Add Chandigarh, Jaipur and Ahmedabad to the list,” observes Technomedia’s Sundaram. So will there be a battle for the metros? “Without doubt, there will be maara maari for the metros and some other big cities. The ‘my place’ factor will also be at play ? they’d like to secure frequencies in cities where they have a presence,” notes Sanjay Salil, promoter of Mediaguru, a company that counsels many prospective FM radio and television broadcasters.

With major companies such as Anil Dhirubhai Ambani Enterprises, Hindustan Times Media and Zee in the fray, expect fireworks for the bidding for radio stations in the metros. One commonly voiced fear: bidders may quote overly high prices. The general impression is that for cities like Delhi and Mumbai the bid may hover at around Rs 12 crore and Rs 15 crore. “While that may be reasonable, companies with financial muscle have been heard threatening to quote Rs 20 crore and Rs 22 crore,” says a media consultant.

Warns Parigi: “If more FM stations are to come up, companies must bid sensibly. Otherwise it may be an exercise in futility.” Fortunately, having burned its fingers in the first round for FM radio stations, the government has put in ample safeguards. Companies have to hand over their sealed bids with 50 per cent of the bid money enclosed in the envelope. The remaining 50 per cent has to be deposited within a week. “That will encourage only serious players,” feels Sundaram. Besides, the last time the bidding process was conducted like an auction in the information & broadcasting ministry’s conference room in Shastri Bhavan where people heard the bid amount and bid higher. “This time people will bid from the more sedate environment of their offices. Strategy, not emotion, may determine bids,” adds Sundaram. Also, as BAG Films’ Rajiv Mishra points out, the information and broadcasting ministry has included a clause in the bidding document to discourage overbidding.

For all this, some bidders gripe that the government has not allowed them to broadcast news and current affairs programmes and that one company can own only one radio station in a city. Parigi is unhappy about the 10-year licence fee. “A 15-year duration would have been better. Reforms must make a business attractive, not just viable,” he says. But for radio listeners around the country, that’s a minor point ? they can look forward to a new listening experience.

Look who are throwing their hats into the FM radio ring

The new boys who are bidding

• TV9 Associated Broadcasting company (promoters of a Telugu channel)
• Shaf Broadcast (equipment supplier for the broadcasting industry)
• Sri Adhikari Brothers (Broadcasting and TV software company)
• BAG Infotainment Pvt Ltd (TV software producers)
• Muthoot Group (non-banking finance company)

The old guard’s bidding too

• Entertainment Network India Ltd (The Times of India group)
• Radio Today Broadcasting (The India Today group)
• Rajasthan Patrika
• HT Music & Entertainment Pvt Limited (The Hindustan Times group)
• Radio Mid-Day (Mid-Day, Mumbai)